pebblewriter

Tag: EURUSD

  • On the Verge: April 26, 2012

    UPDATE:  5:35 PM

    S&P cuts Spain two notches, from A to BBB+, based on contracting economy…cites declining disposable income, private sector deleveraging, front-loaded fiscal consolidation and an uncertain outlook for external demand in many of Spain’s key trading partners.

     

    UPDATE:  3:25 PM

    Here’s a close up of the alternative path, which looks stronger with every uptick.  I haven’t altered its course since first charting it a couple of weeks ago.  Remember, it remains only an alternative until the H&S pattern busts.

    As we originally discussed, the thick, red dashed line is our target.  It’s the center line of a channel that goes back to 1935.  Really.  The rising wedge apex intersects with it at around 1462, which is the 1.618 extension of the purple Crab pattern detialed below (Point X at 1422.38).

    FWIW, it’s also the 3.000 extension of the small Crab pattern (yellow) nestled in the B-C-D legs of the larger Crab.

    UPDATE:  3:15 PM

    Interesting that today’s ramp has come without any help from the euro zone.  EURUSD continues to stall at the channel line discussed in this morning’s update on the euro.

    ORIGINAL POST:  1:45 PM

    Yesterday we examined the fact that SPX had broken a 26-session channel and was in danger of following our alternative forecast higher — the purple dashed line marked “alt.” in the chart below.  Remember, that alternative calls for a strong move to 1462-1472 in short order, while the analog calls for a breakdown first.

    We took a close look at the RSI trend line that, broken back on the 5th when the rising wedge was broken, was being back tested big time.  I mentioned I’d be watching it like a hawk, as I felt it would hold the key to which way this confusion resolves.

    As of right now, that RSI trend line is being broken.  While it’s possible this is an intra-day head fake, I’m not so sure that I’m willing to bet cold, hard cash.  Note the highlighted circle on the RSI portion of the chart below.

    And, expanded here…

    There is the possibility that the downward sloping red, dashed TL will catch it on the way up, but the yellow TL just broken was a major feat.  A close above the TL would imply a definite momentum shift.

    From a bearish perspective, one small Bat pattern that indicated more downside busted when we moved above 1392.  The larger Butterfly (labeled in red) will need its Point C moved over to today’s high, but won’t bust until/unless we exceed 1422 (where C > A.)

    From a bullish perspective, the Bat/Crab pattern marked below in purple correlates very well with the smaller yellow Crab — which, until this morning, was just a Bat.  Remember, Bats terminate at the .886 retracement, and Crabs at the 1.618 extension (or more).

    The small yellow Crab’s 1.618 is 1413.74, while the larger purple Bat’s .886 is 1414.97.  When two targets are in such close proximity, it lends additional credence — all else being equal.    Technically, we could get a move to 1414ish and still have a valid H&S pattern, but as we discussed yesterday, it puts additional strain on the pattern — and the analog — playing out, unless we see a very quick reversal.

    As we approach 1400, the market should at least pause.  It’s the original H&S “idealized” shoulder line, the 1.272 of the small Crab pattern, and a nice round number.  But, unless we reverse in the next hour and see that RSI dip back below the TL, I’m increasingly positive about a move to at least 1414-1415 to fulfill the Crab and Bat.

    Remember, this is still a back test of the rising wedge.  But, I’ve been studying rising wedges a lot lately; and, as we discussed many times [see: In a Fix], it’s not uncommon for a back test to go on up and tag the original apex — faking out all who were playing the broken wedge.

    More later.

  • Update on EURUSD: April 26, 2012

    A couple of days ago, I updated all the EURUSD charts [see: Update on EURUSD], commenting that the pair was approaching a crucial test of the channel that’s guided it for the past year or so.  With this morning’s mildly positive action, things have gone about as far as they can.

    Note in particular the dashed, red channel and the corresponding RSI trend line.   It looks more like a very strong back test than anything else.  If so, and things get going on the downside again, we should finally complete the H&S pattern (lots of those lately) and reach Point D (1.2721) of the presumed Bat without any difficulty.

    One thing of particular interest to bears is the series of fan lines from the Jan 16 lows.  Each has very clearly provided stair steps lower over the past two months.  The latest to be back tested is highlighted in yellow and happens to form half of a rising wedge over the past 16 sessions.

    This rising wedge is about 2/3 of the way to the apex (1.3335), which is also the .886 of the little Gartley or Bat that’s under construction.  We reached the .707 earlier this morning, poking just above the red, dashed channel line intra-day.

    A close outside the channel and above the RSI TL would be wildly positive for the euro; I must admit, I just don’t see that happening given the conditions in the euro zone vis-a-vis the craptastic picture everyone’s painting on this side of the pond.

    More later.

  • Update on EURUSD: April 24, 2012

    April 24, 2012

    From both a fundamental and technical standpoint, the long-term, medium-term and short-term pictures are all negative on the EURUSD.  Yet, it keeps hanging in there, the beneficiary of a great deal of ECB and, yes, Fed intervention.

    Here’s the long term picture as of this morning.  EURUSD has been stuck in that purple channel for years, and isn’t likely to break out anytime soon.  Note the fan line off 2000-2002 coming into play again soon.

    From a harmonic standpoint, the purple pattern calls for a trip to the .886 at .9115, but not anytime soon.  The red pattern has more immediate import.  There are plenty of candidates for a Point B — near the .382, the .618 and the .786.  While it’s possible we’ve completed a Gartley, it normally requires a bit more precision than this, so I’m assuming that was a near miss.

    There’s a good chance we’ll target at least a Bat pattern with completion at the .886 of 1.2226 — spitting distance from the larger (purple) pattern’s .500.  But, to get there, we’ll have to continue following the red dashed channel and not be waylaid by the fan line.

    The channel is fairly strong — in place for over a year.  And, there’s a fan line just above current prices for reassurance purposes.  The close up picture below gives us an idea what to expect in the near term.

    This potential Bat pattern calls for a move lower, to at least the .886 level at 1.2721 — which, coincidentally, is right at that fan line.  We can also see that the last fan line off the presumed Point X leaves a rather narrow margin of safety for the next move down.  A break of 1.3110 would start the ball rolling.

    The H&S pattern we’ve been watching for what feels like forever has resisted playing out, though the channel will force its hand soon enough.  It’s mirrored by an RSI trend line which is there for the breaking after another crash into the upper TL.

    Investors who play the EURUSD would be wise to use stops.  The ongoing problems in Greece, Italy, Portugal, Ireland, etc. have been exacerbated by election angst in France and the failure of the Netherlands government.  But, the ECB has learned much from the Fed about propping up markets.

    While their efforts don’t promise of a return to prosperity anytime soon, they’ve grown very fond of the stick save press release.   They’ll be using it a lot in the coming weeks.